Americas: Strategies for a Sustainable Future

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HOUSTON--(BUSINESS WIRE)--I’m pleased to be here to discuss strategies for a sustainable future.

As leaders of this industry, we face a variety of challenges, from weak
global economies to rising public concerns about the safety of our
products. But in every country I visit, the conversation quickly turns
to shale gas and its impact on the chemical business.

Without question, the reversal of fortunes of the American chemical
industry is one of the most remarkable stories flowing from the growth
in unconventional oil and gas.

Today, I’ll share my perspective on this new energy landscape and the
renaissance in American chemistry that it has ignited.

And looking beyond today’s shale gas advantage, I’ll also address how
chemical companies around the world can sustain leading performance over
the peaks and valleys of the business cycle.

The Big Picture

Let me start with the big picture.

The world is on the cusp of a new age of unconventional energy. It is
transforming America’s energy future, unleashing economic growth, and
improving the environment.

That energy future will be built on oil and natural gas. U.S. proven
reserves of natural gas have grown close to 50 percent since 2005. We
now have close to a century’s worth of supply.

Equally impressive is the growing production of unconventional oil,
which by next year will have nearly halved U.S. oil and liquid fuel
imports. ExxonMobil sees real prospects for North America transitioning
to a net energy exporter by 2025.

Liquefied natural gas exports will be part of that picture. For example,
an ExxonMobil joint venture here in Texas has proposed a world-class LNG
export project. This $10 billion investment would generate an estimated
$31 billion in economic gains over the life of the project. This
includes 45,000 direct and indirect jobs during the five-year
construction period, and thousands more permanent jobs as well.

ExxonMobil’s LNG project is a striking example of how energy investments
create jobs and drive economic expansion. In fact, by the end of the
decade, unconventional oil and gas is projected to support three million
U.S. jobs and increase real GDP by 2 to 3 percent. Given the American
economy grew at an almost imperceptible one-tenth of one percent in the
fourth quarter, these are numbers that should make everyone sit up and
take notice.

We are also seeing environmental benefits from the rising use of natural
gas in electricity generation. U.S. energy-related CO2 emissions have
fallen to their lowest levels in nearly two decades. And, producing
electricity from shale gas uses less than half the water required by
coal, a tremendous sustainability benefit.

So how important is the new age of unconventional energy? It’s unlike
anything we’ve seen in this country since the dawning of the age of oil,
some 150 years ago in Pennsylvania’s Marcellus Shale region.

And what ushered in these two greatest breakthroughs in U.S. energy
history? The private sector.

It was innovative technology developed by entrepreneurs risking private
capital in a free market. It was not the result of government policies
that picked winners or losers. That critical insight about the true
source of innovation and growth must be the foundation of our ongoing
advocacy for free markets and free trade.

The American Chemical Renaissance

Let me now turn to the renaissance unfolding in American chemistry,
fueled by feedstock and energy from unconventional resources.

Just five years ago, U.S. chemical production was in steady decline due
largely to the rising price of natural gas. America was on the verge of
becoming a net importer of chemicals. Growing supplies of shale gas and
gas liquids have changed all that.

North American chemical manufacturers now have a major cost advantage
over competitors around the world that rely on more expensive, oil-based
feedstocks.

This has boosted profitability and enabled the industry to regain its
position as America’s largest exporter. It has also stimulated new
investment. For the first time in more than a decade, major capacity
additions have been announced that convert ethane to ethylene, the
largest petrochemical building block.

According to a recent study by the Federal Reserve, these represent a
capacity increase of 33 percent by 2017, which is the equivalent of six
to eight new world-scale steam crackers. On top of that are smaller
projects already completed, equivalent to at least one steam cracker.

ExxonMobil Chemical is part of this picture. We are progressing plans
for a multi-billion dollar world-scale steam cracker and premium
polyethylene expansion at our Baytown, Texas, site, already the
country’s largest integrated refining-chemical complex.

While all announced projects may not materialize, the U.S. industry is
clearly poised to expand its position as a leading petrochemical
producer. And with 85 percent of demand growth projected to occur in
emerging markets, this is great news for U.S. chemical exports.

Keys to a Sustainable Future

The brightened outlook for American chemistry is not an excuse for
complacency. The industry will continue to be a highly competitive and
cyclical global business.

The industry remains subject to both economic and political cycles, as
well as cycles of new capacity that create boom and bust industry
conditions. Moreover, as we have seen repeatedly in the past, feedstock
advantages change over time. And new technologies like shale gas
extraction migrate quickly around the world.

This brings me to the subject of my talk: strategies for a sustainable
future. What strategy can help companies remain successful over these
peaks and valleys in the chemical industry landscape? In a word –
sustainability. Sustainability may sound like a buzzword, but it is a
driving force in the chemical industry.

Sustainability starts with reducing the environmental impact of our own
operations. It also entails supplying value-added products that benefit
customers and help them reduce their environmental impact. Both must be
done in a manner that delivers attractive returns to shareholders while
benefiting society.

These three dimensions of sustainability underpin ExxonMobil’s
disciplined long-term approach, which our new project in Baytown
illustrates.

Reducing environmental impact has been an ongoing strategy at Baytown.
Over the past decade, the site has invested over $1.3 billion in
environmental improvements, reducing NOx and VOC emissions by more than
50 percent and achieving double-digit improvements in energy efficiency.
The new cracker project will be contained within the site’s existing
footprint. State-of-the-art environmental technology will maintain total
site emissions within existing permitted levels.

The project will produce value-added products for our customers,
including stronger, lighter, lower-cost packaging solutions with reduced
environmental impact. These advanced polymers are the product of ongoing
company research that has reduced film thickness by two percent per year
for the last 20 years.

Benefiting shareholders and society is the third dimension of
sustainability. Our unique Baytown project will be a win-win for
ExxonMobil and the Greater Houston area. Returns will be sustained over
the ups and downs of the business cycle through both leading-edge
technologies and integration with our refining and natural gas
businesses, providing unmatched scale and a 100 percent premium product
slate.

The Greater Houston area will benefit from an estimated 10,000 jobs at
the peak of construction. The multiplier effect of new economic activity
created by the facilities would add 3,800 other jobs in the area and
increase regional economic activity by $870 million per year.

The bottom-line is that sustainability is good business, benefitting the
environment, customers, shareholders and society. It’s the strategy for
a sustainable future in the global chemical business.

Free Markets, Free Trade

Before I close, I would now like to return to my earlier point about
free markets and free trade, which are vital to innovation and
sustainable growth.

Free trade is the life blood of the chemical industry. New industry
investments in the Middle East, Asia and now North America will increase
trade flows, benefiting producers and consumers worldwide.

But with this opportunity comes obstacles.

The prospects of growing exports often prompt calls for protectionism
from competitors seeking to protect their domestic advantage.
Protectionist pleas are often wrapped in pious appeals to nationalism,
but the real agenda is to unlevel the playing field and stifle the
competition.

As an industry, we must vigorously oppose protectionist measures that
limit access to global markets. We must also promote free trade
initiatives such as the U.S. - EU Free Trade Agreement and the
TransPacific Economic Partnership. The American Chemistry Council
actively supports both.

Likewise, we must oppose protectionism in our home countries, such as
calls to restrict U.S. natural gas exports. These proposals to block LNG
investments, justified by artificial price caps, represent a selective
and harmful departure from free-market and free-trade principles.

Blocking LNG exports would be an affront to America’s trading partners
and undermine the efforts under way to strengthen our trading ties.

For example, why should the EU drop tariffs on U.S. chemicals, made from
advantaged natural gas, if the U.S. blocks exports of that gas in
liquefied form?

Likewise, how can the U.S. secure sanctions against China for
restricting exports of rare-earth minerals, without inviting sanctions
on the U.S. for restricting natural gas exports?

And, how can the U.S. ask Japan, a close ally suffering from energy
shortages, to stop importing oil from Iran, if we prevent it from
importing gas from the U.S.?

The answers are obvious, yet the damage would go beyond the chilling
effect on trade. Restricting LNG exports would also be harmful domestic
policy. It would return the U.S. to the era of price controls, which in
the 1970s and ‘80s caused falling natural gas production, supply
shortages equaling one-quarter of demand, price spikes and diminished
economic opportunity.

Eventual deregulation of natural gas in the mid 1980s created the
free-market conditions that spawned the age of unconventional oil and
gas. The voices that opposed deregulation back then were wrong, just as
they are wrong today in calling for new controls on natural gas.

Every credible independent study – including by IHS, our conference host
– projects no significant increase in the price of natural gas from LNG
exports. That’s because LNG exports would stimulate increased production
from this country’s vast resource base.

The point is this: Protectionism and price controls defy economic logic,
defy historical evidence, and undermine prosperity and progress here and
abroad. Free markets and free trade are extraordinary engines that are
proven to stimulate investment, create jobs, and build closer ties among
nations.

Conclusion

Let me conclude these remarks with a challenge for our industry.

Modern chemistry provides the basic building blocks of civilization. Our
innovation and products help people – all over the world – live lives
that are safer, healthier and more prosperous than at any point in human
history.

As we look to the future, we must do more than embrace the business
opportunities that the new age of unconventional oil and natural gas
presents. We need to communicate to consumers and government leaders
about the potential and promise ahead.

We must communicate the indispensable role of the chemical industry and
how sustainability underpins everything we do.

Beyond that, we must remind the public that free markets and
sustainability are, in fact, inextricably tied together. For we know
firsthand that free markets unleash human ingenuity, and that the result
is greater efficiency, a stronger economy, and better environmental
protection.

Simply put, it falls to us to tell the extraordinary story of modern
chemistry, our contributions to a sustainable future, and how free
markets and free trade bring people and nations together to build a
better world.

ExxonMobil Chemical is one of the world’s premier petrochemical
companies with manufacturing, technology, and marketing operations
around the world. The company delivers a broad portfolio of products and
solutions efficiently and responsibly, with a commitment to create
outstanding customer and shareholder value. ExxonMobil Chemical endorses
the principles of sustainable development, including the need to balance
economic growth, social development and environmental considerations.